Paul Kupiec of the American Enterprise Institute suggests, in a thought-provoking column in the Wall Street Journal, that one possible solution would be to move federal bureaucracies out of Washington.

Donald Trump pledged to rebuild America’s troubled inner cities, “drain the swamp,” and restore Americans’ confidence in their government. The president-elect can deliver on these promises by moving federal government agencies out of the nation’s capital and closer to the citizens they serve in cities like Detroit, Cleveland or Milwaukee.

He points out that two bureaucracies are currently looking to build new headquarters.

The FBI’s current headquarters, the J. Edgar Hoover Building, was built in 1975. It is now too small to meet the FBI’s needs, and it requires major repairs. The specifications for a new FBI headquarters include 2.1 million square feet of office space with access to adequate transportation. The construction budget alone is about $2.5 billion. …The Labor Department is also looking for a new headquarters… The new building could be as large as 1.4 million square feet and, if costs are similar to those proposed by the FBI, the building budget alone would exceed $1 billion.

So why, he asks, don’t we locate those headquarters in places that would benefit from federal redistribution?

…consider what relocating the FBI headquarters to Detroit would do. Moving 11,000 FBI employees would hardly make a dent in the D.C. economy. Over 275,000 people—over 14% of the workforce—are federal-government employees, according to the Office of Personnel Management. In contrast, 11,000 well-paid federal government jobs and $2.5 billion in construction spending would provide a significant boost to the Detroit economy, where less than 2% of the workforce are federal employees.

Here’s the basic argument.

With modern communications technology, there is no reason that the FBI’s new headquarters, or the headquarters of other federal government agencies, must be located in the nation’s capital. The concentration of federal agencies in a single area increases the potential for a breakdown of government services in the event of a terrorist attack… Reducing risk is but one benefit. It would also be healthy for the country to more broadly distribute the wealth and power of federal-government agencies across the nation.

According to the 2010 U.S. Census, 11 of the 20 richest U.S. counties—including the three richest counties—are in the Washington, D.C., metro area. Incomes near the national capital are bloated not only by generous federal-government payrolls, but also by “Beltway bandit” consultancy firms that provide contract services to federal agencies. It is little wonder that many Americans view the federal government as a money machine for bureaucrats and political insiders.

Here’s the most persuasive argument for moving government departments to other spots in America.

Taxpayers would save money if bureaucracies were built and operated outside of DC.

Many towns and cities across America would welcome the economic development and stability that accompanies a well-paid federal-agency workforce like the FBI or the Labor Department. The expense of managing the federal government should be used to spread wealth beyond the nation’s capital and revitalize the economies of America’s ailing cities. Moving agencies out of Washington will also save millions of dollars because the costs of acquisition, building maintenance and housing for federal employees will shrink outside of the Washington bubble. In 2016 federal employees in the D.C. area receive a 24.78% premium over the base federal pay scale because they work in a high-cost region, according to the Office of Personnel Management.

Part of me likes this idea, especially since the burden on taxpayers presumably would decrease.

But I confess to being conflicted on the issue. Here are my concerns.

Shouldn’t we focus on shutting down counterproductive bureaucracies rather than moving them? Whether based in Detroit or DC, departments such as HUD, Agriculture, Energy, Education, and Transportation shouldn’t exist.

If we move bureaucracies (whether they are necessary ones or useless ones), does that create the risk of giving other parts of the nation a “public-choice” incentive to lobby for big government since they’ll be recipients of federal largesse?

Will we simply get duplication, meaning a new bureaucracy somewhere in America without ever really getting rid of the original bureaucracy in Washington, DC?

Though maybe if I was in charge of the process, it wouldn’t be a bad idea.

I could locate some bureaucracies in the dodgy parts of cities such as Detroit. Especially departments such as HUD and HHS since they helped cause the economic misery in inner cities.

I’ve also highlighted agencies (such as the EEOC) that seem especially prone to senseless regulations.

And I’ve explained why private regulation actually is a very effective way of promoting health and safety.

Today, let’s get specific and look at the Food and Drug Administration. This bureaucracy ostensibly is supposed to protect us by making sure drugs and medical devices are safe and effective before getting approval, which seems like it might be a reasonable role for government.

But the FDA routinely does really foolish things that undermine public health. The likely reason is that the bureaucracy has a bad incentive structure. As Professor Alex Tabarrok has explained.

…the FDA has an incentive to delay the introduction of new drugs because approving a bad drug (Type I error) has more severe consequences for the FDA than does failing to approve a good drug (Type II error). In the former case at least some victims are identifiable and the New York Times writes stories about them and how they died because the FDA failed. In the latter case, when the FDA fails to approve a good drug, people die but the bodies are buried in an invisible graveyard.

This video from Learn Liberty looks at some data on how the FDA’s Type II errors have led to thousands of deaths, but mostly focuses on whether people and medical professionals should have the freedom to makes choices different from what the FDA has officially blessed.

It’s also worth mentioning that the process of drug approval is jaw-droppingly expensive, as Professor Tabarrok noted in another column.

It costs well over a billion dollars to get the average new drug approved and much of that cost comes from FDA required clinical trials. Longer and larger clinical trials mean that the drugs that are eventually approved are safer. But longer trials also mean that good drugs are delayed. And the more expensive it is to produce new drugs the fewer new drugs will be produced. In short, longer and larger trials mean drug delay and drug loss.

The FDA bureaucracy can’t even approve things it already has approved. There was a big controversy a few months ago about the EpiPen, which is a very expensive device that auto-injects medication to people suffering severe allergic reactions.

But the device is only costly because the FDA is hindering competition, as noted by the Wall Street Journal.

Epinephrine is a basic and super-cheap medicine, and the EpiPen auto-injector device has been around since the 1970s. Thus EpiPen should be open to generic competition, which cuts prices dramatically for most other old medicines. Competitors have been trying for years to challenge Mylan’s EpiPen franchise with low-cost alternatives—only to become entangled in the Food and Drug Administration’s regulatory afflatus. …the FDA maintains no clear and consistent principles for generic drug-delivery devices like auto injectors or asthma inhalers. …injecting a kid in anaphylactic shock with epinephrine…is not complex medical engineering. But no company has been able to do so to the FDA’s satisfaction.

Research from the Mercatus Center reveals that the FDA imposes ever-higher costs and gets ever-higher budgets, but also how the bureaucracy fails to deliver on its obligation to facilitate innovation.

The expense of putting drugs and devices through this system is almost unimaginable. The cost of bringing low- to medium-risk 510(k) medical devices to market averages $31 million, $24 million (75 percent) of which is dedicated solely to attaining FDA approval within an average of about six months. Any significant improvement to the device requires reapplication. For higher-risk medical devices where there may be significant health gains, the costs are about $94 million, $75 million (80 percent) of which is dedicated to attaining FDA approval. For drugs, the situation is much worse. It costs an average of $2.6 billion simply to get a drug through the FDA process and onto the market. This does not include postmarket monitoring, the terms of which are laid out by FDA upon approval. These costs have increased from about $1 billion between 1983 and 1994. …we continue to increase the funding and authority for FDA and assume that we will somehow boost innovation in medical products (drugs and devices) despite the growing obstacles. This has not happened. …Congress continues to increase funding for FDA through both the general fund and industry user fees…with the hope that performance goals and additional funding would increase FDA’s performance and lead to an increase in innovations. …but FDA finds strategic ways to narrowly meet each goal while frustrating the original goal of improving health outcomes through innovation.

By the way, the FDA also does really bone-headed things. I’ve previously written about the bureaucracy’s war against unpasteurized milk (including military-style raids on dairies!). Now the bureaucrats think soldiers shouldn’t be allowed to get cigars.

The Wall Street Journalhas the details of this silly nanny-state intervention.

You might think GIs in Iraq and Afghanistan have enough to worry about with Islamic State and the Taliban. But it turns out they’ve also got a problem called the Food and Drug Administration. In August a new FDA rule went into effect that forbids tobacco makers and distributors from handing out free samples. Some companies that have been donating cigars to service members for decades have now stopped for fear that this is now illegal. The FDA nuttiness has attracted the attention of Rep. Kathy Castor, a Democrat who represents Florida’s 14th district, which includes “Cigar City,” or Tampa. She has introduced a bill to “reinstate the tradition of donating cigars to our military members to provide them with a taste of home while deployed.” Her press release notes that cigars are the “second-most requested item” from troops overseas. …cigars for service members is in question because it’s a proxy for the political war on tobacco, but the first casualty is common sense. The FDA’s bureaucrats are happy to have U.S. soldiers, sailors, airmen and Marines dodge bullets overseas but they’re horrified they might relax by lighting up a stogie.

But the nanny-state war against soldiers enjoying cigars is downright trivial compared to the deadly impact of the FDA’s attack on vaping.

The Food and Drug Administration’s e-cigarette regulations, which took effect last week, immediately struck two blows against public health. As of Monday, companies that sell vaping equipment and the fluids that fill them are forbidden to share potentially lifesaving information about those products with their customers. They are also forbidden to make their products safer, more convenient, or more pleasant to use. The FDA’s censorship and its ban on innovation will discourage smokers from switching to vaping, even though that switch would dramatically reduce the health risks they face. That effect will be compounded by the FDA’s requirement that manufacturers obtain its approval for any vaping products they want to keep on the market for longer than two years. The cost of meeting that requirement will force many companies out of business… All of this is unambiguously bad for consumers and bad for public health. Yet the FDA took none of it into account…the Family Smoking Prevention and Tobacco Control Act…gave the FDA authority over tobacco products, a category to which it has arbitrarily assigned tobacco-free e-cigarettes, even when they contain nicotine that is not derived from tobacco or no nicotine at all. …A brief that 16 advocates of tobacco harm reduction filed last week in support of Nicopure’s lawsuit notes that the cost of the FDA’s regulations will far outweigh their benefit if they cause even a small percentage of vapers to start smoking again or deter even a small percentage of current smokers from switching. That’s because of the huge difference in risk between e-cigarettes and the conventional kind (at least 95 percent, according to the Royal College of Physicians)… The FDA acknowledges that its regulations might also harm public health by retarding the substitution of vaping for smoking. But it does not include that cost in its analysis, deeming it too speculative. The FDA literally assigns zero value to the lives of smokers who would have quit were it not for the agency’s heavy-handed meddling.

Oh, I suppose I also should mention that FDA red tape is responsible for the fact that Americans have a much more limited selection of condoms than Europeans.

I’m sure there’s a good joke to be made about the bureaucrats screwing us in ways that interfere with us…um…well, you know.

Let’s wrap up with some tiny bits of good news. First, Arizona’s Goldwater Institute has been remarkably successful in getting states to adopt “Right to Try” laws that give seriously ill people the right to try investigational medications.

Sadly, those laws will have limited use until there’s also reform in Washington. Fortunately, there’s some movement. Here’s a video from a congressional hearing organized by Senator Johnson of Wisconsin.

Here’s a second item that sort of counts as good news.

If there is one silver lining to the dark cloud of FDA incompetence, it’s that the bureaucrats haven’t figured out how to criminalize those who use drugs for “off-label” purposes (i.e., for reasons other than what was approved by the government). A good example, as reported by the New York Times, is a tooth desnsitizer that’s only been recently approved by the FDA (after being available for decades in nations such as Japan), and already dentists are using it to fight cavities.

Nobody looks forward to having a cavity drilled and filled by a dentist. Now there’s an alternative: an antimicrobial liquid that can be brushed on cavities to stop tooth decay — painlessly. The liquid is called silver diamine fluoride, or S.D.F. It’s been used for decades in Japan, but it’s been available in the United States, under the brand name Advantage Arrest, for just about a year. The Food and Drug Administration cleared silver diamine fluoride for use as a tooth desensitizer for adults 21 and older. But studies show it can halt the progression of cavities and prevent them, and dentists are increasingly using it off-label for those purposes. …Silver diamine fluoride is already used in hundreds of dental offices. Medicaid patients in Oregon are receiving the treatment…it’s relatively inexpensive. …The noninvasive treatment may be ideal for the indigent, nursing home residents and others who have trouble finding care. …But the liquid may be especially useful for children. Nearly a quarter of 2- to 5-year-olds have cavities

Since I’m not familiar with the history of the FDA, I wonder whether the bureaucrats have ever tried to block medical professionals from using drugs and devices for “off-label” purposes.

Let me close with one final point. Our leftist friends aren’t very interested in reforming the FDA.

Instead, they argue that the big problem is greedy pharmaceutical companies and suggest European-style price controls.

That could save consumers money in the short run, I’m sure, but it would gut the incentive to develop new medications.

One expert looked at the Rand Corporation estimates that such policies would lead to a decline in life expectancy of 0.7 years by 2016. He then crunched the numbers and concluded that the aggregate impact would be worse thing to ever happen. Even worse than the brutality of Mao’s China.

…let me put this in context. In 2060 there will probably be 420 million Americans and 523 million Europeans. And suppose that whatever changes we make in drug regulations today last for one human lifespan, so that everybody has a chance to be 55-60. So about a billion people each losing about 0.7 years of their life equals 700 million life-years. Since some people live in countries outside the US and Europe [citation needed] and they also benefit from First-World-invented medications, let’s round this up to about a billion life-years lost. What was the worst thing that ever happened? One strong contender is Mao’s Great Leap Forward, in which ineffective agricultural reforms and very effective purges killed 45 million people. Most of these people were probably already adults, and lifespan in Mao’s China wasn’t too high, so let’s say that each death from the Great Leap Forward cost what would otherwise be twenty healthy life years. In that case, the worst thing that has ever happened until now cost 45 million * 20 = 900 million life-years. Once again, RAND’s calculations plus my own Fermi estimate suggest that prescription drug price regulation would cost one billion life-years, which would very slightly edge out Communist China for the title of Worst Thing Ever.

I guess the bottom line is that the FDA is a typical regulatory agency, both incompetent and expensive. But if the statists have their way, things could get a lot worse.

P.S. While the regulatory burden in the United States is stifling and there are some really inane examples of silly rules such as the FDA’s war on vaping, I think Greece and Japan win the record if you want to identify the most absurd specific examples of red tape.

But even the government was the proper size (America’s Founders had the right idea on that issue) and even if pay levels were more reasonable, that wouldn’t solve all problems. There’s also the issue of making sure that bureaucrats work hard and don’t cause trouble, something that is a big problem in government agencies and departments because of policies that make it virtually impossible to fire anybody.

I recently explored the issue of how to deal with bad bureaucrats and noted that civil service rules have the effect of shielding ” slackers, trouble makers, and other undesirable employees.”

A community is wondering why a teacher who is accused of lewd acts with a child is still getting paid. State agents arrested 48-year-old Shelley Jo Duncan, accusing her of having inappropriate contact with a 14-year-old boy. …messages detail the pair’s plans for future sexual encounters, including Duncan allegedly texting the boy she would give him “oral sex with a cough drop in her mouth.” ….The Tishomingo Public Schools Superintendent Ken Duncan, who is Duncan’s husband, said that she is entitled to her pay while she is suspended. “The district has been instructed by legal counsel, per the Teacher Due Process Act governed by Oklahoma statute, that the teacher is entitled to compensation during her suspension,” Duncan reportedly said during the meeting.

I don’t know whether to laugh or cry.

Why isn’t sexual contact with a child an immediate cause for termination? I can’t imagine that private employers would have any tolerance for this kind of behavior.

To be sure, the rule of law is vitally important. If there are legal procedures for dealing with bad bureaucrats, they should be followed. So, in this specific case, perhaps Ms. Duncan’s husband is correct and that she should be paid.

But this is why I wrote earlier this month that “there needs to be a much tougher approach when contract negotiations take place.” Simply stated, politicians like to curry votes from powerful interest groups, so contract negotiations between governments and government unions generally are a sham. All too often, the politicians and unions conspire against taxpayers.

This is why pay levels for bureaucrats tend to be exorbitant. It’s why pensions are so extravagant (and a fiscal nightmare, as I wrote just yesterday). And it’s why civil service rules protect deadbeats and sketchy people.

Unfortunately, there’s a big difference between identifying a problem and solving a problem. It doesn’t really matter if we can identify the “public choice” incentives that lead to bad decisions in government if we can’t then figure out the policies that counteract those bad incentives.

Yes, this is why a no-tax-increase position should be a no-brainer. And this is another piece of evidence why the natural profligacy of all governments should be constrained by spending caps. But even I will admit that those are macro-type solutions that only indirectly make it harder for politicians and bureaucrats to misbehave.

On that depressing note, I guess all that’s left is for us to decide whether Ms. Duncan deserves to be in the Bureaucrat Hall of Fame. For what it’s worth, I think we have to wait before making that decision. If she (and perhaps her husband) can manipulate the rules and get paid for 12 months while doing nothing, even though she was caught red-handed (or perhaps we should say Altoid-mouthed) for misbehaving with a child, she’ll deserve membership. And if you think that’s asking too much, don’t forget that a bureaucrat in India managed to get paid for more than two decades even though he stopped showing up for work.

But there’s another possible answer. People employed by government take advantage of preferential rules in ways that should get all decent people upset.

Writing for Reason, Eric Boehm tells us about a cop who successfully mugged taxpayers in Paterson, New Jersey.

Despite not having to show up for work since June 2007, Manuel Avila received periodic increases in pay, managed to double his monthly pension and qualified for free healthcare for the rest of his life at the expense of city taxpayers. Avila qualified for all those benefits while spending the past nine years on paid leave from the Paterson, New Jersey, police department because he was under investigation for having sex with a female prisoner at the city’s jail.

Wow, go fishing every day, get pay increases, a fat pension, and free healthcare. Where can I sign up for that deal?

Government, of course.

And let’s not overlook sex with a female prisoner, which gives a whole new meaning to the notion of fringe benefits. Reminds me of the Pennsylvania bureaucrat who came up with the clever idea of trading welfare benefits for sex.

But the story is actually more disturbing (at least from the perspective of taxpayers) than you think.

It gets worse, though, because that crime would never have happened if Avila’s bosses hadn’t already been trying to give his retirement benefits a little boost. …Avila—apparently with plenty of help, or at least an abundance of people willing to look the other way—was able to boost his annual pension to about $70,000 from an estimated $32,000 if he had been forced to retire in 2007 when a police psychiatrist recommended removing Avila from the force. “But instead of forcing Avila out of the police department, city law enforcement officials decided to allow him to stay on the job for another six months so he could reach a critical pension milestone of 20 years, the court records show,” the Paterson Press wrote. While there, he was charged with sexually assaulting a female prisoner. Those charges were dropped in 2010 after the city paid an undisclosed amount of money to the accuser as part of a settlement, but Avila remained on paid leave from the department until finally retiring this year.

This is galling. If Mr. Avila misbehaved and was declared unfit, why wasn’t he immediately terminated?

And now that we’ve learned about this scandal, why aren’t the officials who enabled this ripoff being fired?

At the risk of repeating myself, the answer is government.

There are two broader policy lessons from this scandal.

First, the use of “defined benefit” pension systems for bureaucrats should be discontinued. By way of background, these “DB” plans promise workers guaranteed monthly payments based on formulas including factors such as years worked and highest pay levels. There is no reason why DB plans can’t be feasible and successful (indeed, the Netherlands has a private Social Security system based on this model), but politicians at the state and local level repeatedly have demonstrated that they are incapable of operating this type of system, both because they promise lavish benefits (on top of overly generous pay levels) as a means of buying political support (using our money) from government workers and because they then don’t set aside enough money to finance the generous benefits they have promised. That system may be good for getting reelected in the short run, but it’s also why there’s a multi-trillion dollar shortfall that is contributing to deep fiscal problems in states such as Illinois and California. To stop from going deeper in the red, states should switch to “defined contribution” plans, which work similar to the IRAs and 401(k)s that are now prevalent in the private sector.

Second, something needs to be done to curtail the power of government unions. It’s not just that they conspire with politicians to get excessive pay for bureaucrats, but they compound that damage by also insisting on rules that make it very difficult to discipline or terminate problem employees. In the private sector, employees generally work “at will,” which means they can be fired without reason (this is one of the reasons the United States is near the top in the World Bank’s Doing Business ranking. In government, by contrast, slackers, trouble makers, and other undesirable employees are shielded from this discipline. And that results in cases (such as the example discussed above) that are bad for taxpayers and bad for government. I don’t know if this means that unions should be prohibited (as even President Franklin Roosevelt believed), but surely one lesson to be learned is that there needs to be a much tougher approach when contract negotiations take place.

P.S. Let’s shift to a different topic. I’ve written many times about the gap between intentions and results in government. It’s very common to see politicians vote for laws that (at least in some cases) they think will help people, but they fail to recognize the indirect or second-order effects of government intervention.

Now we have another example. Almost all politicians will agree that it’s a good idea to prohibit child labor in poor nations. But what if poor families don’t have any better options? Could it be that government intervention will hurt the people who are supposed to be helped?

According to the World Bank (not normally a hotbed of libertarian thought), the answer is yes.

The study explores the law that increased the minimum employment age from 14 to 16 in Brazil in 1998, and uncovers its impact on time allocated to schooling and work in the short term and on school attainment and labor market outcomes in the long term. The analysis uses cross-sectional data from 1998 to 2014… The estimates show that the ban reduced the incidence of boys in paid work activities by 4 percentage points or 27 percent. …The study follows the same cohort affected by the ban over the years, and finds that the short-term effects persisted until 2003 when the boys turned 18. The study pooled data from 2007 to 2014 to check whether the ban affected individuals’ stock of human capital and labor market outcomes. The estimates suggest that the ban did not have long-term effects for the whole cohort, but found some indication that it did negatively affect the log earnings of individuals at the lower tail of the earnings distribution.

So the bottom line is that lower-skilled workers missed a chance to earn money when they were young and they then suffered income losses over time as well.

Bastiat certainly wouldn’t be surprised by this outcome. And if the lower-skilled workers understood how they were hurt, I’m sure that they wouldn’t feel very grateful to politicians for their “compassion.”

P.P.S. This reminds me of the “sweatshop” controversy. The left wants to ban factory work in the developing world because they don’t understand or appreciate that such jobs are a great opportunity when nations are at a certain stage of development.

P.P.P.S. This isn’t the first time that the World Bank has produced good research. In 2014, the bureaucrats released a good study showing how high tax rates facilitate corruption. And in 2012, they issued a study explaining how large public sectors undermine prosperity.

But as a human being, what irks me most about big government is the way that insiders use the system to enrich themselves. I don’t like it when politicians, bureaucrats, lobbyists, contractors, cronies, and other well-connected interest groups funnel money to themselves at the expense of ordinary people.

Especially when taxpayers pay twice. They have less take-home income because of higher tax burdens and over time their pre-tax income doesn’t grow as fast because a bloated public sector reduces growth.

In other words, a lose-lose situation for regular folks.

But it’s a win-win situation for insiders. Consider, for instance, this exposé in the Daily Caller about a bureaucrat who double-dipped by getting a big paycheck from Uncle Sam an interior designer while also getting outside contracts as – you guessed it – an interior designer.

A fashionista from Beverly Hills, Calif., collected millions in interior design contracts from federal agencies by claiming to be “disadvantaged,” while simultaneously working at the Department of Veterans Affairs (VA) sending work to design companies. Ronda C. Jackson was a no-show at her VA job, colleagues said. Records show she instead spent her time running a design company that got $7 million in contracts from the VA and other government agencies since 2008, reselling them marked-up goods like five-seat tables for $17,000.

Here are some of the sordid details.

Jackson worked as a full-time federal employee at the Los Angeles VA center in fiscal years 2010 and 2011, which ran from Oct. 1, 2009 to Sept. 30, 2011. Pay records show she worked as a GS-12 level interior designer and made $80,000 each year. Colleagues said they never saw Jackson in the office. …In fiscal years 2008 through 2010, the company had $222,000 in contracts with the VA, federal records show. …she was being paid as a full-time employee for almost a whole year while also working on a contract for the same agency and at the same hospital and for the same type of work. Her job as an employee was to buy furniture for the VA, and her job as a contractor included selling it.

But Ms. Jackson took it to the next level, getting a paycheck and being a contractor at the same time. How did she get away with all this?

Well, her boss set a good example of how to waste money and bilk the system.

Robert Benkeser, a high-level manager in charge of facilities, was told that Jackson appeared to have a no-show employment arrangement, but did nothing. Benkeser is the same manager who was in charge of an official vehicle fleet from which 30 of 88 cars disappeared. He fired the employee who exposed the missing cars as well as the fact that government credit cards from the same unit appeared to have been used fraudulently. Benkeser received only “counseling” for the misconduct.

Gee, I wonder if he was one of the VA bureaucrats who got a big bonuses after the agency put veterans on secret waiting lists?

But what makes Ms. Jackson special is the way she doubly double-dipped.

That’s an odd way of describing something, but somehow appropriate because she got herself classified as “disadvantaged” so that she could get contracts without the usual competitive bidding process.

A 2009 contract, in which records from USASpending.gov classify the company as HUBZone while listing its Beverly Hills address, says she was paid $72,000 for outfitting the Federal Aviation Administration with “framed artwork for CMEL guest room and main building [and] conference rooms.” The company subsequently moved to Los Angeles. Jackson charged $70,000 for an unspecified “21 [inch] freestanding unit” and $17,000 for a five-person outdoor table. Ninety-eight percent of the nearly $7 million in contracting dollars awarded to Jackson’s company came without the government weighing her offer against those of other companies.

So instead of paying twice as much as something would cost in the private sector, which is typical for government, her no-bid scams probably resulted in taxpayers paying four times as much as necessary. So she was a bureaucrat, a contractor, and disadvantaged, which we can consider a form of triple-dipping.

As the old saying goes, nice “work” if you can get it.

There’s no question that Ms. Jackson has “earned” her way into the Bureaucrat Hall of Fame. Congratulations, Ronda!

By the way, the article raises a bigger issue.

Jackson’s case underscores questions about VA’s army of 167 full-time interior designers. Nearly every VA hospital in the country has one or more.

I can understand why it might be acceptable to have one interior designer (assuming the VA stays in the business of running hospitals, which obviously shouldn’t be the case), but why 167 of them?

Oh, it’s government and we need to remember what Milton Friedman said about “other people’s money.” Forget that I even asked such a silly question.

Back in 2013, I got very upset when I learned that senior bureaucrats at the IRS awarded themselves big bonuses, notwithstanding the fact that the agency was deeply tarnished by scandal because of its efforts to help Obama’s reelection campaign.

That’s when I decided to put forth my “First Theorem of Government,” which simply states that the public sector is a racket for the benefit of a ruling class comprised of bureaucrats, interests groups, cronies, and other insiders.

The same thing is true on the other side of the Atlantic Ocean. The U.K.-based Daily Mailreports that senior bureaucrats in the country’s government-run healthcare system get lavish taxpayer-financed pension.

Hundreds of NHS managers have amassed million-pound pension pots while presiding over the worst financial crisis in the history of the health service… As patients face crippling delays for treatment, A&E closures and overcrowded wards, bureaucrats have quietly been building up huge taxpayer-funded pensions. They will be handed tax-free six-figure lump sums on retirement, and annual payouts from the age of 60 of at least £55,000 – guaranteed for life.

Here are some of the details, all of which must be especially aggravating for the mistreated patients who suffer because of substandard care from the government.

Nearly 300 directors on NHS trust boards have accrued pension pots valued at £1million or more; At least 36 are sitting on pots in excess of £1.5million – with three topping a staggering £2 million; The NHS pays a staggering 14.3 per cent on top of employees’ salary towards their pension – almost five times the average of 3 per cent paid in the private sector; …About 500 earn more than the Prime Minister – after Health Secretary Jeremy Hunt ordered them to ‘show restraint’ on executive pay. …the scheme every year pays retired staff £10 billion more than it takes in. That black hole has to be filled by the taxpayer. The subsidies enable NHS executives – including managers, human resources bosses and directors of ‘corporate administration’ – to build up vast pensions, at minimal personal expense.

Here’s the bureaucrat with the biggest pile of loot from taxpayers.

The biggest single beneficiary is Professor Tricia Hart, who retired as chief executive of South Tees Hospitals NHS Foundation Trust in January with a £2.6 million pension. That figure entitled her to a lump sum of at least £335,000 on retirement, plus an inflation-proof annual pension of £110-115,000. …at least four HR directors have amassed million-pound pensions.

By the way, I have nothing against people accumulating big nest eggs. Even if they work for the government.

My objection, as discussed in yesterday’s column about state and local bureaucrats in America, is when bureaucrats have special taxpayer-financed deals.

Especially, as we see all too often in the U.K., when taxpayers don’t even get good healthcare in exchange for the lavish salaries and benefits.

Almost four million people are now waiting for cataract surgery, hip and knee replacements and other routine operations. The number of people forced to wait more than four hours in A&E has doubled in two years. And wards are full of elderly people who cannot be discharged – because there are no care home places for them.

A spin doctor tried to rationalize and justify the cozy scheme for bureaucrats.

…a spokesman for NHS Pensions stressed that…The amounts individuals accrued were a result of the ‘rules and regulations’ of the NHS scheme. ‘What people get paid is a matter for NHS trusts,’ he added.

I’m amused by the assertion that the lavish pensions are the result of simply following the “rules and regulations.” That’s precisely the point. Government insiders write the rules and regulations and they inevitably produce systems that are very good for them and not so good for taxpayers.

I’m also amused (and when I write “amused,” I actually mean “irritated” or “appalled”) at the claim that compensation levels are “a matter for NHS trusts”. If the spin doctor was talking about a private company, I would agree. As I’ve argued before, pay levels in private companies should be determined by managers and stockholders.

But we’re talking in this case about pay levels in a government bureaucracy. And notwithstanding the elitist attitude of some government officials, taxpayers have every right to get outraged when they learn that their money is being squandered on excessive pay and gold-plated benefits.

If the Actuarial Standards Board enacts recommendations from its Pension Task Force, actuarial valuations for state and local government pensions will report unfunded liabilities of over $5 trillion and funding ratios of just 39 percent. The public pensions industry will hate it, but those figures are the best available measures of the costs of public employee retirement plans. …That $5.2 trillion is the number most economists would think is most relevant to considering the costs of public sector pensions. …The simple reality is that public pension underfunding is a significant problem that can only really be addressed by increasing contributions or by lower pension benefits, choices that pretty much everyone involved in the pension world would prefer to avoid.

You won’t be surprised to learn that some states are more irresponsible than others.

CNBCreports that Nebraska is the most prudent and Alaska is the worst (politicians can’t resist squandering oil revenue). Several blue states rank poorly (think Illinois, Connecticut, California, and New Jersey), but there also are red states (such as Louisiana and Kentucky) that have made very foolish promises.

In Nebraska, for example, the pension liability amounts to about $386 per person, the lowest in the nation. That compares with Alaska ($19,394 per person: the highest in the country), Illinois ($15,158 per person) and Connecticut ($14,769). The average pension shortfall in 2014 amounted to $4,383.

The Wall Street Journal has an interactive table that allows readers to see which states have the biggest shortfall.

In other words, state and local bureaucrats have been promised a lot of money when they retire.

Much more money than is available.

And when you add Social Security benefits to the mix, as Andrew Biggs has calculated, you wind up having lots of bureaucrats enjoying very lavish levels of retirement income.

I tabulated the pension benefits paid to full-career “regular” state government employees (meaning, non-public safety) retiring in 2012. For states in which public employees participated in Social Security, I estimated the Social Security benefit the retiree would be eligible to receive. And finally, I compared total retirement benefits to the worker’s earnings immediately preceding retirement. …Mississippi paying the lowest replacement rate of 54% of final earnings. …West Virginia paid the most generous benefits, equal to 115% of final earnings, followed by New Mexico (113%), Oregon (105%), California (102%) and, yes, conservative Texas (101%).

Here’s a map that accompanied the article.

But maybe big numbers, maps and tables are too abstract.

To give some examples of how this is leading to a fiscal crisis, consider these recent news reports.

Nevadans should brace for reduced services, higher taxes or both — the necessary consequence of the Public Employee Retirement System of Nevada (PERS) having badly missed its investment target last year…PERS has now missed its target over the past five, 10, 15, 20 and 25 years — suggesting that another taxpayer-rate hike is on its way. Remarkably, this shortfall has occurred even though markets have nearly tripled from their 2009 lows, and currently sit at or near all-time highs. Nevada’s soaring pension costs — ranked third-highest in the nation at 9.8 percent of own-source revenue, according to 2013 data from the Public Plans Database — aren’t just due to overly optimistic investment assumptions, however. Another factor is the extraordinarily generous nature of the benefits.

…in the world of public sector pensions – among the biggest institutional investors in global markets – politicians…pretend they can count on big investment returns every year, while disregarding warning signs, mounting debts and increasingly unsustainable pension systems. We’re seeing the latest pension fund returns come in, and almost uniformly, it was a terrible year for states – and thus taxpayers. The California Public Employees’ Retirement System, the largest U.S. public pension fund, logged a paltry annual return of 0.6 percent. …CalPERS is currently only 76 percent funded, a figure that will inevitably drop given the latest weak returns.

Oregon’s major business groups want lawmakers to start dealing with rising public pension costs as early as the session that opens Feb. 1. Although those costs start to kick in with the 2017-19 budget cycle — 18 months away — advocates say it’s not too early to whittle down an unfunded liability projected at $18 billion over the next few decades. …projected increases in contributions to PERS, which covers about 95 percent of Oregon’s public workers, will eat deeply into what they can spend over the next several two-year budget cycles. Cheri Helt, co-chair of the Bend-La Pine School Board, says pension costs will jump from the current 16 percent of payroll to 20 percent in 2017-19, and to 25 percent in the cycle afterward. …Jamie Moffitt, vice president and chief financial officer for the University of Oregon, says rising pension costs will eat up 40 percent — about 2 percentage points — of the 5.5 percent average annual increase in tuition.

New Jersey’s Senate president is in a Brando-like fight with government unions that he says are trying to extort or bribe legislators into doing their bidding. …At issue is the woefully underfunded state pension system. The teachers union wants to put a measure on the November ballot to amend the state constitution to require quarterly state pension payments of increasing amounts. …government unions have so much political sway over politicians that they often call the shots on their own pensions and benefits. …New Jersey’s public pensions are underfunded to the tune of $82 billion. Thomas Healey of the state’s bipartisan Pension and Health Benefit Study Commission notes that pensions and health care now eat up 11% of New Jersey’s budget, and without reform this will grow to 28% by 2025. …The pension commission has proposed reforms—including a shift to a hybrid retirement plan that includes features more akin to a 401(k)—but unions have blocked them. They now want voters to rewrite the state constitution so pension reform would be all but impossible.

Illinois’s government, says [Gov.] Rauner, “is run for the benefit of its employees.” Increasingly, it is run for their benefit when they retire. Pension promises [are] unfunded by at least $113 billion… The government is so thoroughly unionized (22 unions represent almost all government employees), that “I can’t,” Rauner says, “turn on a light switch without permission.” He exaggerates, somewhat, but the process of trying to fire someone is a career, not an option. …high-tax Illinois will continue bleeding population and businesses, but with one contented cohort — the Democratic political class, for whom the system is working quite well.

The crux of the problem is that most state and local governments have “defined-benefit” plans for bureaucrats, which means that taxpayers are on the hook to provide retiring bureaucrats a specific amount of benefits (not just retirement income, but other goodies such as health care) based on formulas that count years in the workforce, highest salary levels, and other factors. That may not sound totally unreasonable, but politicians realize they can buy votes by cutting deals with government unions and providing retirement benefits that are extremely generous, especially compared to what’s available for workers in the private sector.

But that’s simply one part of the problem. The other part of the problem is the employers with defined-benefit plans (usually referred to as “DB plans”) are supposed to set aside money in investment funds so that there’s a growing pool of assets that can be used to pay for the lavish benefits promised to the bureaucracy. But as we’ve already learned, politicians often are reluctant to take this step. They like committing lots of future money to bureaucrats, but when putting together annual budgets, they generally can buy more votes by allocating money to things like schools and roads rather than depositing money into a pension fund.

So the net result is that there’s a big unfunded liability, meaning that the amount that politicians have promised to give bureaucrats is larger than what’s set aside in the pension funds. And to make matters worse, the pension funds usually have dodgy accounting (they assume the investments will earn more money than is realistic). Which is why the actual shortfall is about $5.2 trillion, as noted above.

Given this ticking time bomb, some of you may be wondering why the title says there’s a libertarian quandary. Surely the answer is to cauterize this fiscal wound with immediate cuts and to avoid an even bigger long-run disaster by shifting newly hired bureaucrats to a defined-contribution system such as IRAs or 401(k)s. This type of reform automatically eliminates any liability for taxpayers since retirement benefits for bureaucrats would be solely a function of contributions to retirement accounts and the investment performance of those funds (most state and local bureaucrats also are part of the Social Security system).

Yes, that is the answer, but the quandary (to add to my collection) is whether the federal government should force, or even encourage, this type of reform. Don’t state and local governments, after all, have the right to make stupid decisions?

The pensions of states and local governments are, collectively, trillions of dollars in the hole. This debt is crippling budgets and will dump an enormous burden on future generations. Yet state and local politicians have proven that they cannot, or will not, solve the problem. The federal government ought to step in. But how? Instead of bailing out these pensions, Congress should pass a law allowing states and local governments to reduce promised benefits—something that is now illegal under some states’ statutes or constitutions. …Many pensions allow retirement at age 55; states and local governments could mandate that benefits cannot be drawn until age 65. Payments could be capped at 150% of the median income in the local jurisdiction. Automatic cost-of-living increases that now exceed expected inflation could instead be tied to increases in the median income. …Local governments must also be required to terminate their defined-benefit plans. These should be replaced with defined-contribution plans, like 401(k)s or 403(b)s… Rep. Devin Nunes (R., Calif.) proposed withholding federal aid to government entities that don’t accurately report pension funding. That would be a step forward but would not solve the problem of underfunding.

I obviously agree that there should be no bailouts, but I’m still not convinced that Washington should mandate good policy by state and local governments.

Congress has a tremendous opportunity to require state and local government employee pension plans to accurately disclose their multi-trillion dollar unfunded liabilities. …For years, economists and government agencies like the Congressional Budget Office have called for so-called “fair market valuation,” which both more accurately calculates the value of public pension liabilities and accurately tells those plans that taking more investment risk doesn’t make their plans cheaper. …there’s legislative language already written: Rep. Devin Nunes’s Public Employee Pension Transparency Act (PEPTA), which has a number of Congressional co-sponsors including House Speaker Paul Ryan, would require state and local plans to accurately disclose their liabilities using fair market valuation. The federal government would respect state and local rights by not forcing any changes to how pensions are funded, but Nunes’s plan would require that state and local governments to tell the public – including people thinking of purchasing municipal bonds – how much they really owe to their pensions.

P.S. By the way, advocates of limited government don’t experience many victories, but there actually was a very good reform of the pension system for federal bureaucrats during the Reagan years. Yes, federal bureaucrats are still over-compensated, but it’s not nearly as bad as it used to be. Yet another example of how Reaganomics was a success.

P.P.S. Shifting to bad news (or laughable news), the hacks in California tried to argue that lavish pensions for bureaucrats boost the economy. Andrew Biggs does a great job of debunking this nonsense.

The California Public Employee Retirement System (CalPERS) issued a report in July claiming that its benefit payments to retired government employees in 2013-2014 “supported 104,974 jobs throughout California and generated more than $15.6 billion in additional economic output.” …To reduce pension benefits for public employees, the study implies, would harm the overall California economy. …This study is nothing short of propaganda that wouldn’t get a passing grade in a freshman economics course. …the CalPERS study lacks one important component, called “counting both sides of the equation.” It needs to count economic costs as well as economic benefits. …CalPERS doesn’t create money out of thin air. Every single dollar of CalPERS benefits comes from a dollar that taxpayers or government employees contributed to the program or from the interest earned on those contributions.

P.P.P.S. The focus of this column is on the inherent instability of defined-benefit pension plans for bureaucrats, but let’s not lose sight of the fact that the underlying issue is that bureaucrats are ripping off taxpayers. Here are some blurbs from a Reasonreport by Eric Boehm on how this scam works in California.

If public service truly is a sacrifice, then join me in shedding a tear for the 20,900 public workers in California who pulled down more than $100,000 in retirement benefits during 2015. …Leading the way for 2015 was Michael Johnson. The former Solano County administrator received a $388,407 pension last year. …Rounding out the top three are Stephen Maguin, a former Los Angeles County Sanitation District general manager who pulled down $340,811 in 2015 and Joaquin Fuster, a former UCLA professor who got a pension worth $338,412 last year. …Curtis Bowden, a former member of the California Highway Patrol…retired all the way back in 1947, which means he’s been collecting pension checks for 68 years, after working just 5.3 years for the state. He got $24,800 from CalPERS in 2015.

Wow, I’m not sure what’s more impressive, Getting an annual pension of nearly $400K after being a country bureaucrat or working for just a bit over five years and getting 68 years worth of retirement checks?